Burger King reels from whopping raw-material hike

Faced with what it said is a whopping 88 per cent increase in the price of beef patties that go into its burgers, Richard Lake's Restaurant Associates Limited, the owner of Burger King and Popeye's chicken franchises in Jamaica, said it will revise the costs of its burger meals this week.

The Jamaica Broilers Group has supplied the fast-food giant locally for the last 30 years, Lake told Wednesday Business in emailed responses, noting that the company now only uses imported raw material to manufacture its patties.

"Information from our supplier indicates that they no longer use local beef in the manufacturing of our product," Lake said.

The fast-food chain advised that as of tomorrow, December 18, it will revise the cost of its meals, but chairman of Jamaica Broilers Group, Christopher Levy, said the meat-processing company cannot be blamed for Burger King's decision because, despite cheaper options, they could only source beef from a Burger King list of approved suppliers.

Levy said Burger King currently does not approve local suppliers of beef for use in its products.

Lake, however, hit back at Levy's assertion, arguing that Jamaica Broilers "is the local supplier".

"That is not correct. Broilers is an approved supplier," Lake said, noting that in the earlier years of the contract between the companies, Jamaica Broilers "used to process the cows here in Jamaica and take the beef from those local cows. They are approved to do that."

Jamaica Broilers opted out of beef processing under its Content Beef brand some five to six years ago, Levy said. Instead, the company now breeds cattle at its St Ann farm for sale into the local industry.

The arrangement between the companies, therefore, sees Jamaica Broilers importing the raw material for Burger King's beef patties. The patty content is imported from regions such as the United States and Australia.

"If they are going overseas to buy the product from anywhere, they have to buy it from a similar place like Broilers, which is approved (because), there is a thing s called traceability, and we have to trace where our product comes from at all times," said Lake.

He said, however, that Burger King only learnt in July 2014 that Jamaica Broilers had stopped using local beef altogether in the processing of the beef patties.

In justifying its impending increases, the burger chain said that while its other suppliers have marginally increased their prices, it has been hit with an 88 per cent increase in the cost of its Whopper patties, with 70 per cent of that increased cost spanning the period June to November 2014.

"All other suppliers have provided moderate price increases not exceeding 15 per cent commensurate with the devaluation of the Jamaican dollar," Lake said.

But for Levy, while he does not wish "to get into a public fight" with his customers, Jamaica Broilers simply reacted to worldwide increases in the cost of the raw material used to process patties for the Burger King franchise when it passed on the added costs.

no local suppliers

"That's the reason for the price movements and BK has failed to acknowledge that," Levy told Wednesday Business in a telephone interview on Monday.

"There is a 50 per cent increase in the raw material alone, and that's just the beef. I'm not talking about packaging, electricity or exchange rate. So this cost increase is not our cost because of our costs at JBG moving at all," said Levy.

Jamaica Broilers is limited in the sources from which it can buy these raw material, and "there is presently no local suppliers of raw material on the BK list," Levy said, noting that only Burger King could approve the meat that goes into their patties.

Burger King provides a list of about 25 suppliers, none of which are local, Levy said, emphasising that Jamaica Broilers is "mandated" to buy from approved suppliers.

"There is cheaper beef available on the world market but I can only buy from a BK supplier," the Jamaica Broilers head stressed, reiterating that the added costs cannot be attributed to the company.

"Since December 2013, we have increased prices at a total average of 12 per cent," Lake said. April 2014 saw an average seven per cent increase, with meals increasing by some five per cent in July.

In January, a Whopper with cheese combo cost $550 but now sells for $640.

Asked what the revised price list will look like, Burger King said it was still finalising the new prices.

Of the expected fall off in customer patronage when the prices are increased, Lake said, "as is expected, each time we have had to increase prices, we see a reduction in customer count, which affects revenue."